It’s been a rough summer for shippers and receivers. Demand for trucks and drivers are high, but the supply of both resources is lacking.
“There are not enough trucks,” said Lance Jungmeyer, president of the Fresh Produce Association of the Americas, Nogales, Ariz. “It’s been a very challenging year. On shipments to the East Coast, in some cases, the cost of freight was more than the value of the produce.”
Jungmeyer said owner-operators aren’t replacing equipment at the rate they used to, but that’s just one factor contributing to the tight market. Meanwhile, small trucking firms, which handle the vast majority of produce shipped by truck, are having a hard time expanding their fleets, said Kenny Lund, vice president of support services for the Allen Lund Co., La Cañada, Calif.
“To get loans, you have to prove you don’t need it,” Lund said. “It’s hard for smaller companies.”
And there’s no easy fix on the horizon because a multitude of issues are contributing to the capacity issue.
“Over the last few years, several regulations have altered the transportation and logistics landscape, and they have all reduced truckload capacity to some extent,” said Kerry Byrne, executive vice president of Cincinnati-based Total Quality Logistics. “Hours of service changes, CARB regulations and the shortage of drivers are several examples.”
New hours of service rules, limiting drivers to 11 hours of daily driving and a total 14-hour work day, took effect in February 2012, and the compliance date was July 1, 2103. The intent was to make the roads safer, but accident rates have actually increased, Lund said.
“It’s government at its worse,” said Lund, who added that regulations have forced experienced drivers out of the industry.
Lund also said that a 34-hour restart rule, which forces drivers to get two consecutive nighttime periods of rest, puts more trucks on the road during peak congestion times because it must include the 28 consecutive hours from 1 a.m. on the first day until 5 a.m. the next day.
“It puts more trucks on the road at 5 a.m.,” he said. “It dumps a lot of trucks on roads just as roads are getting more use.”
Reducing driving time from 12 hours to 11 hours per shift cut already tight truck capacity by more than 8%, said Doug Stoiber, vice president of produce transportation operations for L&M Transportation Services Inc., Raleigh, N.C. Stoiber said that if more drivers were recruited and more trucks were put into use to make up for that capacity cut, roads would become even more congested because the added equipment and drivers would be subject to the same restart restrictions.
Stoiber also said the hours of service restrictions, which are enforced by electronic on-board recorders, had a negative effect on on-time deliveries.
“We have had carriers run out of hours less than 25 miles from their destinations and have to shut down for 10 hours,” he said. “Of course, this made the delivery a day late.”
Faced with high costs and burdensome regulations, some drivers and owner-operators are simply walking away. Marshall Kipp, president & CEO of Advanced Transportation Services Inc., said many veteran drivers are retiring, and less experienced drivers can be difficult to insure.
Capacity issues are exacerbated on the West Coast by California Air Resources Board regulations that took effect in 2012. If refrigeration equipment on trucks is not in compliance, grower-shippers, freight brokers, freight forwarders and receivers can be fined as much as $10,000 per violation, per day. Thus, companies have the option of investing more money in their equipment or not doing business in a state that produces nearly half of all U.S. fruit, nuts and vegetables.
“CARB continues to be problematic,” Lund said. “More and more trucking companies don’t want to come into California. They’re getting more aggressive about enforcement.”
Jungmeyer said the issue has created a cottage industry for shipments headed east to west on trucks that aren’t compliant and can’t legally operate in California.
“They stop in places like Phoenix and hand off the trailer to someone else,” he said. “It’s making Phoenix a logistics hub.”
But other regions have their own issues. Stoiber said rates for short runs on the eastern seaboard have increased by as much as 25% in the past few years.
“Owner/operators and small fleets — they make up the majority of produce haulers — took a big hit after the 2008 recession, with many small firms shuttering their businesses,” Stoiber said. “Those that remain have to raise their rates on the short runs to stay in business.”
Byrne said freight demand is expected to increase in the second half of the year, which will put added pressure on capacity. That means continued demand for services from companies like TQL, said Byrne, who added growth in the third-party logistics market is expected to be at least 5% in 2014.